13 Aug 2020

GDP growth could fall by $21b - NZIER

6:08 pm on 13 August 2020

New economic modelling suggests lockdown measures may reduce annual GDP growth by $21 billion due to effects from the Covid-19 pandemic.

GDP drop

Photo: 123RF

The research by New Zealand Institute of Economic Research (NZIER) said GDP - which measures the value of goods and services - had fallen to levels similar to 2016.

The estimate equates to a drop of between 6-7% in New Zealand's annual GDP figures pre-Covid-19.

The drop was attributed to social and economic restrictions under lockdown measures. While the tourism sector was most affected, industries that supported it - such as accommodation, food and beverage services - were also hit hard.

"We found that output also decreases, although less sharply, in industries that are not directly reliant on the tourism sector (e.g. other primary sector and manufacturing, construction and other services)," NZIER wrote in a statement.

"The output decrease in these industries is due to the decrease in available labour and capital immobilised by the implementation of restriction measures."

GDP loss was highest in tourism-centric regions, including Queenstown-Lakes, Rotorua and Auckland, but all regions' economies were expected to be affected due to the "flow-on effects", the institute said.

"Over the longer term, as economic impacts remain, there will be a need for greater flexibility to allow for both physical and human capital to be redeployed toward surge industries.

"Focusing on investment that builds physical and human capital to foster an environment where the New Zealand economy can adapt quickly to changing circumstances will be most conducive to a sustainable recovery."

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